The Sunday morning news. [volume] (Jersey City [N.J.]) 1886-1891, 1887-04-17

The Security of 3. & L. A. Investments
Explained by Members.

discussing some OF the features OF bullulnB
and Loan Associations. These articles
were presented because public attention
had been called to the associations by the
attempt of the Legislature to pass law
for their government, against which ma
jority of the associations made strong
protest. which resulted in the withdrawal
of IL q proposed law. But there are other
very important features of these assocla-
tions which were not covered by our for
rner articles and which are entitled to much
consideration. The first point that per-
son who is about to become a member of a
bnildipp and loan association desires to
satisfy himself upon, is the security the
ASSOCIATION affords him for the investment
of his m~ney. The main argument that is
now being made against the responsibility
of the ssociations is that they might
loan money on property, which would not
realize the amount loaned in case of a fore
closure, thus putting the associations at
great loss, which must necessarily be borne
by the members composing the associa-
tions. NEWS reporter interviewed some
gentlemen who understand the whole
workings of the associations, and they de-
elared that it is an impossibility to sustain
a loss through this means. They explained
it in this wa,: When member desires to
build house or to buy one already built,
he makes his bid FOR the amount of money
required, for which he must pay q pre-
MUM, which varies according to circum-
stances from, say, ten to forty dollars on
each share of 5000 sch. the premium SO
paid goes into the treasury and becomes
part of the funds of the associations. Three
appraisers are then appointed, usually by
The chairman, who make an estimate OF the
nroperly on which the loan is to be made.
The appraisers are usually practical men
who know the value of real estate, and as .
basis for their estimate, they ascertain the
value Of property in the neighborhood of
that upon which loan is to be made. Ii
the borrower proposes to build, they exarA-
inc the plans of the house and estimate its
probable cost, considering at the same time
the character and responsibility of the con-
tractor who will de the work. The APP
praiscrs fix their value and make their re-
pert to a board of management, who can
reduce the valuation of The appraisers if
they desire This is often done, but the
board of manage seldom incr eases the
valuation of the appraisers. If the proper
ty is found sufficiently valuable to loan
upon. the loan Is made, for which the as
ISOLATION takes mortgage. In case the
mortgage is torecloseS, anu the property
does not realize the amount loaned upon
it, the asso citation is secure, notwlthstand-
ing. To illustrate: A member who has
been in the association enc year borrows
50, Geo to buy a house. The mortgage on
the house is foreclosed, and realizes only
81 800 1t would appear tnat the assoeia-
ton sus aimed a loss of $500; bu. that is
not the fact. To entitle man to borrow
81, coo he must be the owner OF at least
ten share in the association. He pays on
each share Is cents week. and at the end
of one year, the time of the loan, he will
have paid $12 on each share, making 1920
on his ten shares, He also pays premium
of say, $40 on each share for tie privilege
of borrowing the money, making 500 for
the ten shares. The association has then
received from him $500. The ASSOCIATION
and this, added to the $3.50 paid in by the |
borrower, makes 81, 720 in all. The asso-
citation has still to receive $3.50 to make it
self secure. How is il done? 1t has |
house worth 1880, which will rent for |
SIS per month, or $3.50 year. In two |
yeats it will have yielded $3.50, which will |
cover the deficiency required to make up |
the original $4,000, aid also pay the taxes |
on the property. The property belongs to |
the assecia ion, and still continues to yield |
$3.50 year, which goes into the treasury,
and the association instead of losing, gains |
by the transaction. 1t might be said that |
the property could not be rented, but the |
association takes that risk.
The gentlemen who volunteered this in
formation declare that there is no way in
which the associations can be laced in
danger if they are managed judiciously.
The chief thing TO be guarded against is
the payment of money to an ofhcer ether
than the one who should receive it. The
reporter learned that in some of the ASSOC
stations it is sometimes the custom to pay
dues, etc, to the secretary instead otto the |
treasurer, and very frequently outside of
meetings This is denounced by members
of such associations where it is not prac
ticed, as an evil which should be checked. |
They declare that, as the treasurer is the
only officer under bond, he alone should |
receive all money, and no money should |
be paid outside the meetings OF the associ- |
atoms.
The NEWS, in previous article pointed |
out that these associations are not designed |
for savings banks or to afford opportunities |
to speculate upon the savings of others. |
Their purpose is to assist members in pur-
ehasing their houses by Offering to loan
them sufficient money to do SO under GER
tain conditions, which have been explained.
But their real purpose is frequently de-
feated by men who invest their money in
them in speculation and without any idea
of ever borrowing from the association.
Such men are considered "drones," and
they often bring upon the associations a
period of stagnation. causing the funds of
she association to become Improbable be-
eause there is no one to borrow them. In
deed. the period often comes when the as
sociation is complied to buy the stock held
by the ssdrones' at good profit to the
latter, in order that new blood or borrow
ers may be infused into it. The Hadspeth
bill, which caused such discussion re-
Gently, had a clause which would have the
effect OF driving drones from the assocla
tons when the period of stagnation ar
~ hnnl.s thirAlr th.af